In addition to considering the Advantages and Disadvantages of Bequests and Outright Gifts, it is necessary to examine some of the legal and tax requirements required by the Internal Revenue Service and State taxing authorities:
Organization Must Qualify to Receive Charitable Contributions – IRS Publication 526 provides guidance as to what sorts of organizations are qualified to receive charitable contributions. While this may seem evident, it is the Donor who will inevitably bear the burden if a donee organization ends up not to qualify.
Proper Documentation Must be Filed with the IRS – Donors may only deduct a charitable contribution that exceeds $250.00 if he or she receives an Acknowledgment from the qualified organization or certain payroll deduction records. If more than one gift exceeding $250.00 is made, a Donor must receive either separate acknowledgments for each gift that exceeds $250.00 or one verification that shows their total contributions.
Fair Market Value of the Donated Property must be Ascertained – For cash or publicly traded securities, this requirement is reasonably straightforward to carry out. Less clear, however, can be the fair market value of assets that are more difficult to evaluate (i.e. works of art, real estate, etc).
More sophisticated giving strategies also involve tax and legal requirements.
As a result of the serious nature of these requirements, we regularly highly recommend seeking qualified legal counsel to assist you when making donations over $250.00.
For additional guidance and requirements, refer to these IRS Publications:
IRS Publication 561: Determining the Value of Donated Property
IRS Publication 526: Charitable Contributions